mikes1531
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Post by mikes1531 on Jun 4, 2016 13:21:48 GMT
If they pay 100% of interest it would deplete the PF too much. That depends on how long it takes to wrap things up. Interest already has been paid through 27/May, so we're only talking about interest accrued since then. If it takes a year, then that would be 12% of accrued interest, and that would be £204k. Yes, that's a significant amount relative to a £2.118M PF balance, but the balance probably will be higher a year from now. And using the PF in a way that allows SS to continue to say their investors haven't had losses must be worth an awful lot to the business. But they don't have to make that decision for a number of months, and in the intervening time they'll gain better knowledge regarding the prospects for defaults in other SS loans.
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gnasher
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Post by gnasher on Jun 5, 2016 4:57:57 GMT
The important headline here is for saving stream to be able to continue to say that nobody has lost any capital on this platform. That is the big strapline for me. Surely this won't be the last default, and the provision fund can't possibly cover this loss and future capital loss? Should SS even want to make the 'no capital lost' boast for reasons mentioned by others ie lull people into false sense of security? These are 12% loans ie high risk so surely the assumption we will lose no capital is misunderstanding what all this is about? Jack P I think this is the most realistic statement in this thread so far. The proposition of lending at 12% and always getting all your capital back (not to mention interest) in the long term is a vacuous fools hope. We should expect 7% to 9% and then only if it all goes rather well. In bad times it will be less, it may go negative. As I have posted before I am a bit wary of SS, it seems to have certain bubble characteristics. I can see the wildly exuberant SM becoming overly pessimistic all to easily because many lenders do not seem to be grounded in reality. RS stands a reasonable chance of maintaining their strapline "not a penny lost" with rates at 6% something and below. SS at 12% - not a chance.
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Post by Deleted on Jun 5, 2016 6:58:46 GMT
Surely this won't be the last default, and the provision fund can't possibly cover this loss and future capital loss? Should SS even want to make the 'no capital lost' boast for reasons mentioned by others ie lull people into false sense of security? These are 12% loans ie high risk so surely the assumption we will lose no capital is misunderstanding what all this is about? Jack P I think this is the most realistic statement in this thread so far. The proposition of lending at 12% and always getting all your capital back (not to mention interest) in the long term is a vacuous fools hope. We should expect 7% to 9% and then only if it all goes rather well. In bad times it will be less, it may go negative. As I have posted before I am a bit wary of SS, it seems to have certain bubble characteristics. I can see the wildly exuberant SM becoming overly pessimistic all to easily because many lenders do not seem to be grounded in reality. RS stands a reasonable chance of maintaining their strapline "not a penny lost" with rates at 6% something and below. SS at 12% - not a chance. RC and SS have largely different markets and investors. In RS you can set it in automode and forget for years. In SS you have to actively monitor and evaluate many loans a month and also the secondary market on a daily basis... But at the end your comment on the rates is totally wrong. The SS model and excellent and auto-sustaining. The only key point is the quality of the valuations. That is the point you seem to fail understanding. Until the valuations are correct and money lent to borrowers is limited to 70% LTV, the SS risks are minimal. The problems might start only when you rely on non-independent valuations (eg paid by the borrower) or negligently allow too rosey scenarios in the valutations. This is something that needs to the done very very very strictly. What we are seeing from the initial numbers of PBL20 is that the valuation report was WRONG, overvaluing at least 30% the net value of the underlying asset. This is a key issue and if I were in the SS board I would seriously think suing the evaluators in case of such a big unjustified difference (and certainly would not reward them with more money asking them to sell the asset...). So, far from being the model wrong or unsustainable, it is the execution that is key for SS. If the valuations are too generous or done badly, not only we will not see 12% real returns, but might assist to ingent loss of capital... An the provision fund will only be able to cover part of it (and sorry, forget the interest... it would be stupid to deplate a small resource to give 'interest' in case of a default with low recovery).
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Post by dualinvestor on Jun 5, 2016 8:13:46 GMT
RS stands a reasonable chance of maintaining their strapline "not a penny lost" with rates at 6% something and below. SS at 12% - not a chance. I agree but not because of the interest rates but the credit quality and size and diversity of their loan book. Not getting into the maths RS has sufficient data of its own to make reasonable estimates of future bad debts and fund its PF accordingly, indeed it over funds, according to its internal estimates. SS does not have a sufficient cohort of borrowers to be able to make estimates based on its own experience. I do not know if there are independent empirical studies of the market for poor credit secured lending but a flat 2% figure does appear to be suspiciously round to base the funding upon.
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Post by dualinvestor on Jun 5, 2016 8:33:16 GMT
RC and SS have largely different markets and investors. In RS you can set it in automode and forget for years. In SS you have to actively monitor and evaluate many loans a month and also the secondary market on a daily basis... But at the end your comment on the rates is totally wrong. The SS model and excellent and auto-sustaining. The only key point is the quality of the valuations. That is the point you seem to fail understanding. Until the valuations are correct and money lent to borrowers is limited to 70% LTV, the SS risks are minimal. The problems might start only when you rely on non-independent valuations (eg paid by the borrower) or negligently allow too rosey scenarios in the valutations. This is something that needs to the done very very very strictly. What we are seeing from the initial numbers of PBL20 is that the valuation report was WRONG, overvaluing at least 30% the net value of the underlying asset. This is a key issue and if I were in the SS board I would seriously think suing the evaluators in case of such a big unjustified difference (and certainly would not reward them with more money asking them to sell the asset...). There seems to be a widespread misunderstanding of what the BASIS OF A VALUATION is. On all loans I have looked at they seem to be OMV (OPEN MARKET VALUE). As soon as a loan defaults (even if no formal insolvency proceding ensues) that valuation is more or less redundant. In the case of PBL20 an asking price of 78% of the OMV is, in my opinion, extremely optimistic. Look at the market for residential property that a lot of us have personal experiene, if you wish to sell your house you will have a "valuer" normally a salesman from the local estate agent) come round to give you an idea of the value, his/her first question will usually be, how much do you want? And the rest of the conversation will revove around your answer. In usual circumstances you will put it slightly above YOUR ASPIRATION and hope to sell at a small discount on that. Occassionally there is a sellers market and price expectations are exceeded (remember gazumping?). Then disaster happens, your next door neighbour who has exactly the same house as you loses their job and puts their house on the market priced for a quick sale, at 20% lower than yours. They find a buyer but the sale falls through and the bank/building society loses patience and forecloses, sells the property at auction for substantially less. Suddenly Zoopla, Right Move et al have your average neighbourhood price significantly below what you are asking. Hopefully this will not happen to you but a lot of us know at least some aspects of it. Therefore "Until the valuations are correct and money lent to borrowers is limited to 70% LTV, the SS risks are minimal." is not necseearily a correct statement when the value is based on a premis that is extremely unlikely to persist in a FORCED SALE situation.
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Post by earthbound on Jun 5, 2016 16:08:06 GMT
If they pay 100% of interest it would deplete the PF too much. That depends on how long it takes to wrap things up. Interest already has been paid through 27/May, It has.. but by who? ... who has paid the 158 days interest since the loan expired? I have no idea. typo
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Jun 5, 2016 16:49:22 GMT
RS stands a reasonable chance of maintaining their strapline "not a penny lost" with rates at 6% something and below. SS at 12% - not a chance. . You can compare RS to Z, and SS to MT, but IMO it makes no sense to compare SS to RS. One lends small amounts to a large number of borrowers and the other makes very large loans to a small number of borrowers. A PF is suitable to RS because statistical methods can be used to estimate bad debts, and RS needs a PF to compensate for low interest rates. A PF for SS largely a marketing ploy, but it is comforting to think that they have some skin in the game (although of course it is discretionary).
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mikes1531
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Post by mikes1531 on Jun 5, 2016 17:28:25 GMT
A PF is suitable to RS because statistical methods can be used to estimate bad debts, and RS needs a PF to compensate for low interest rates. RS -- and Z -- also need a PF because AIUI they do not take security.
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mikes1531
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Post by mikes1531 on Jun 5, 2016 17:43:17 GMT
That depends on how long it takes to wrap things up. Interest already has been paid through 27/May, It has.. but by who? ... who has paid the 158 days interest since the loan expired? I have no idea. I haven't a clue where that money came from either. If it came from the borrower, that'd be great. But if that were to be the case, I'd have expected SS would have adjusted the Remaining Time for the loan to reflect that. So my guess is that it came from SS/Lendy. If so, then the next logical question is where in the priority list does that debt come? Would it be taken from the sale proceeds before any capital is returned to investors? Or is it considered accrued interest? If it's AI, is it ranked ahead of, equal to, or behind, investors' AI? (I won't ask whether SS/Lendy had this all sorted out before any 'unreceived' interest was passed along to investors, or whether they're busy scratching their heads over this as we write.) Will we ever find out?
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Post by supernumerary on Jun 5, 2016 17:57:29 GMT
The proposition of lending at 12% and always getting all your capital back (not to mention interest) in the long term is a vacuous fools hope. We should expect 7% to 9% and then only if it all goes rather well. In bad times it will be less, it may go negative. As I have posted before I am a bit wary of SS, it seems to have certain bubble characteristics. I can see the wildly exuberant SM becoming overly pessimistic all to easily because many lenders do not seem to be grounded in reality. RS stands a reasonable chance of maintaining their strapline "not a penny lost" with rates at 6% something and below. SS at 12% - not a chance. Oh really? That is not like you... Aaaaaarrrrrrrrrrrrrrrrrrrrrr
rrrrrrrrrrr
rrrrrrrr 
..... please please please stop!
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Post by dualinvestor on Jun 5, 2016 18:03:53 GMT
A PF is suitable to RS because statistical methods can be used to estimate bad debts, and RS needs a PF to compensate for low interest rates. RS -- and Z -- also need a PF because AIUI they do not take security. RS do take security in some circumstances, from their website "In addition to contributing to the Provision Fund, we require some borrowers (such as property developers and corporate borrowers) to provide security against their loan. This can include things like cars, residential properties, or financial assets." Z have just started car loans where they take title to the car, in a similar way to "hire purchase" I suppose.
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beechside
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Post by beechside on Jun 5, 2016 19:05:50 GMT
When a business goes bust, it's generally because their liabilities are too high or their debtors are not paying up. In other words, their cashflow is screwed. A business (eg PBL020) may be in awful trouble because of trading problems, over-committing itself, cashflow or falling income. However, I don't believe that means the underlying property asset is necessarily bad.
As far as I know, SS doesn't lend on a company's goodwill or trading figures but only on tangible property assets (please correct me if I'm wrong) and so some of the posts here may possibly miss the mark. Yes, a fire sale of the whole business may only yield 10p in the £ but the land and buildings won't be as bad as that. The cost of the administrators and insolvency practitioners (who make payday lenders look like philanthropists) may be high but, providing that the charged assets are ring-fenced, the property should never go for 10p in the £.
BTW, I'm in the camp that ways the PF should help with capital only, not interest. I would be very, very happy to have a platform return 9 or 10% gross after losses and my view is that SS can do that, providing it has stability, something in the bottom drawer and not try to pretend that 12% gross is achievable.
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Post by dualinvestor on Jun 5, 2016 19:17:32 GMT
When a business goes bust, it's generally because their liabilities are too high or their debtors are not paying up. In other words, their cashflow is screwed. A business (eg PBL020) may be in awful trouble because of trading problems, over-committing itself, cashflow or falling income. However, I don't believe that means the underlying property asset is necessarily bad. As far as I know, SS doesn't lend on a company's goodwill or trading figures but only on tangible property assets (please correct me if I'm wrong) and so some of the posts here may possibly miss the mark. Yes, a fire sale of the whole business may only yield 10p in the £ but the land and buildings won't be as bad as that. The cost of the administrators and insolvency practitioners (who make payday lenders look like philanthropists) may be high but, providing that the charged assets are ring-fenced, the property should never go for 10p in the £. BTW, I'm in the camp that ways the PF should help with capital only, not interest. I would be very, very happy to have a platform return 9 or 10% gross after losses and my view is that SS can do that, providing it has stability, something in the bottom drawer and not try to pretend that 12% gross is achievable. The security value of £2.43million did include goodwill and stock, if it hadn't the LTV wold have been over 70%.
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Post by earthbound on Jun 5, 2016 19:31:31 GMT
I would be very, very happy to have a platform return 9 or 10% gross after losses and my view is that SS can do that, providing it has stability, something in the bottom drawer and not try to pretend that 12% gross is achievable. As far as i know that's all i have ever had from SS , not seen any pretending.
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Jun 5, 2016 19:39:44 GMT
I would be very, very happy to have a platform return 9 or 10% gross after losses and my view is that SS can do that, providing it has stability, something in the bottom drawer and not try to pretend that 12% gross is achievable. As far as i know that's all i have ever had from SS , not seen any pretending. Yes, but SS is only young For example; only 15% of all the loans (drawndown, repaid & defaulted) on SS have repaid since they started offering PBLs... Or, the same statistic put a different way; of the £109,997,67 lent, only £16,368,500 has been returned to us investors... We have got to wait a long time before we can confirm what returns we are actually getting (and after a couple of years, my guess is that it will be closer to 10%, maybe even lower...)
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